BANK stocks - DBS, OCBC and UOB - after Singapore' s Trade and Industry Minister Lim Hng Kiang said tighter rules aimed at bolstering the cash buffer banks must hold in case of emergency will take effect in January 2015.

The liquidity coverage ratio, a standard introduced under Basel III, seeks to ensure that banks hold sufficient high-quality liquid assets to match their total net cash outflows over a 30-day period.

By January, the three local banks will have to meet a Singdollar liquidity coverage ratio of 100 per cent and an all-currency liquidity coverage ratio of 60 per cent - increasing by 10 per cent each year to 100 per cent by 2019.

LionGold Corp, which has unveiled a fresh subscription agreement with a Malaysian businessman to raise gross proceeds of S$4.23 million, after its bid to raise S$5 million from a proposed share subscription

 

[TOKYO] Tokyo stocks opened 0.51 per cent lower on Wednesday, tracking losses on Wall Street due to profit taking after the recent record-breaking rises.

The Nikkei 225 index fell 79.00 points to 15,297.24 at the start.

Shares in Nintendo dropped 1.16 per cent to 12,300 yen in the first few minutes of trade after president Satoru Iwata said he would skip an annual shareholders' meeting set for Friday as he had undergone surgery last week to remove " a growth in his bile duct" .

The 54-year-old executive said in a statement Tuesday that he " came through it (surgery) well,

 

In the latest signs of improving economic conditions, consumer confidence surged more than expected in June, while new home sales in May rose more than anticipated. The data offered the latest evidence that the economy has regained momentum after stalling during harsh winter conditions.

The S& P 500 climbed to 1,968.17, another intraday record, and then turned lower around midday. The benchmark index had rallied for six straight days before ending Monday' s session slightly lower. On Tuesday, the Dow suffered its biggest drop since May 20.

The market' s gains evaporated in the afternoon on concerns about an escalation of the conflict in Iraq. US Secretary of State John Kerry urged leaders of Iraq' s autonomous Kurdish region on Tuesday to stand with Baghdad in the face of a Sunni insurgent onslaught that threatens to destroy the country. " The Iraq thing is probably getting more focus than anything else," said Stephen Massocca, managing director at Wedbush Equity Management LLC in San Francisco. " You really had the market go up in almost a straight line since June 12, so at the top of the range here, I' m not surprised to see a little bit of a pullback." The Consumer Confidence Index for June hit its highest level since January 2008, according to the Conference Board, a private industry group. New home sales jumped 18.6 per cent in May to a six-year high of a seasonally adjusted rate of 504,000 units, the Commerce Department said. The PHLX Housing Index rose 0.6 per cent.

 

This is not surprising - to supplement near-zero brokerage income, dealers have been forced to trade on their own and, in this regard, the preference has been low-priced issues.

This should be obvious from the low average unit value traded, which was 44 cents yesterday. Also offering clues on the health of the market is the composition of the top 20 actives list - 15 were priced below 10 cents and all 20 were below 60 cents.

Brokers said the poor volume and the absence of volatility in the index suggest that the market was gearing up for a big move, but cautioned this could very well be on the downside.

 

Turnover, however, was a dismal 1.85 billion units worth $804.7 million, further underlining what a difficult year 2014 is turning out to be for retail brokers. Excluding warrants, there were 187 rises against 254 falls and there was a sense of disappointment among most dealers that a promising end to last week did not spill over.

Much of the blame was said to lie with the Hang Seng Index, which first rose more than 100 points before sliding to a net loss of 389 or 1.7 per cent at 22,804.

The morning gain was thanks to better-than-expected manufacturing numbers in China but reasons for the afternoon slide were less clear - some reports suggested technical, chart-based selling because the index crossed a key level while other observers thought it came because a strengthening Chinese economy means reduced likelihood of government stimulus.

 

[SINGAPORE] The number of properties up for auction by mortgagees (or lenders) as well as their share of the number of properties going under the hammer has hit a quarterly high in Q2.

Auctioneers say this reflects the difficulty that financially stretched borrowers face in securing buyers for their properties since the implementation of the total debt servicing ratio (TDSR) framework a year ago. Because of this, financial institutions have had to repossess more properties and put them up for auction.

The trend is expected to gain momentum as the rising supply of non-landed private homes will make it harder for mortgagors (or borrowers) to find buyers and thus dispose of their properties themselves - resulting in more properties ending up as mortgagee sales.

Furthermore, the reduced inflow of expats into Singapore is shrinking the pool of potential tenants, hitting rental incomes and hurting owners' ability to service their loans.

Figures from Colliers International show that this quarter, 42 mortgagee sale properties have been put up for auction - almost double the 22 in Q1 this year. In Q2 2013, the figure was just six properties.

The latest figure is the highest since Q3 2009, when 63 mortgagee sale properties landed on the auction block. The first-half tally of 64 was double the 32 for the whole of last year - and also a big jump from 24 in 2012 and 39 in 2011.

In H1 this year, the number of properties put up for auction by owners was 192, down from 226 in the same year-ago period.

As a result, while the owner sales' share of properties put up for auction has dropped from 93.4 per cent in full-year 2013 to 75 per cent in H1 2014, the mortgagee sales' share has risen from 6.6 per cent to 25 per cent. On a quarterly basis, the mortagee sale share has doubled from 16.7 per cent in Q1 this year to 33.9 per cent in Q2 - the highest level since the 35.5 per cent share in Q1 2008 during the global crisis.

Colliers' analysis took into account information as at June 19 from auction lists for the major houses for the month of June. While DTZ conducted its auction last Thursday, Colliers, Knight Frank and JLL will conduct theirs this week.

JLL' s analysis shows that for January-May this year, 13 properties (both owner and mortgagee sales) were sold for a total of nearly $26.2 million at auction. Of this, the mortgagee sales accounted for nine properties which fetched $12.8 million.

For the whole of last year, 21 properties amounting to $99.6 million were sold at auction, of which 10 properties totalling $12.6 million involved mortgagee sales.

Typically, financial institutions provide some leeway to borrowers who are experiencing difficulty servicing their mortgages by giving them the first crack at finding a buyer as owner sales tend to fetch a higher price compared with a mortgagee sale which is often seen as distressed. However, the implementation of TDSR has made it difficult for potential buyers to obtain credit.

" More buyers have also chosen to stay on the sidelines with a view that prices will start to ease," noted JLL' s head of auction and sales, Mok Sze Sze.

As a result, said Colliers' deputy managing director Grace Ng, banks have little choice but to respossess such properties - resulting in the increase in mortgagee sale properties surfacing at auctions.

She added that due to exuberance at private housing launches in the past few years, many buyers bought uncompleted properties " off plan" with the non-savvy ending up with units that have undesirable orientation or layout. Such owners now face difficulty finding buyers and tenants.

While the majority of mortgagee properties ending up on the auction block are residential, there are also signs of an increase in strata industrial units, notes Ms Mok.

Going by Colliers' analysis, nearly 63 per cent of the mortgagee sale properties that have been put up for auction in the first six months are residential properties, followed by a 17.2 per cent share each for industrial and retail properties.

Colliers' auction tomorrow will feature a mortgagee sale property at Turquoise condo in Sentosa Cove. The 2,777-sq-ft four-plus-one bedroom unit previously surfaced at an auction on April 30. It was withdrawn without bids at the opening price of $5 million.

Another mortgagee property to be featured at the same auction is a third-floor unit at the freehold Stevens Court. The 2,863-sq-ft unit has five bedrooms. JLL' s auction on Thursday will feature mortgagee sale units at VisionCrest Residence, Residences@Killiney, The Floravale in Westwood Avenue and a shop unit at 116 Yio Chu Kang Road. At Knight Frank' s auction today, a mortagee sale of a two-bedder at Dover Parkview is expected to go under the hammer.

Sharon Lee, head of auctions at the firm, advises those having problems servicing loans to be realistic. Given the buyer' s market today, one has to be aware that potential buyers would be anticipating price corrections - instead of sticking to the last transacted price in the project some time ago, she said.

 

[BEIJING] Activity in China' s factory sector expanded in June for the first time in six months as new orders surged, a preliminary HSBC survey showed yesterday, offering new signs that the economy is stabilising thanks to Beijing' s measures to shore up growth.

Still, many analysts expect that the government may need to roll out further steps in coming months to offset the risks from a cooling housing market and persistent export weakness, after China' s premier vowed last week that the economy would not suffer a hard landing.

The HSBC/Markit Flash China Manufacturing Purchasing Managers' Index (PMI) rose more than expected to 50.8 in June from May' s final reading of 49.4, beating a Reuters poll forecast of 49.7 and creeping above the 50-point level that separates growth in activity from contraction.

It was the first time since December that the PMI was in growth territory, and the highest reading since November, when it was also 50.8.

 

Published time: June 23, 2014 07:04
Edited time: June 23, 2014 11:41

Singapore joins Thailand in registering a jump in household debt to GDP ratios between 2007 and 2013 that is bigger than that of the US for the period between 2001 and 2007, HSBC' s note said. Economists measure household debt against GDP as one way to show the extent that economic growth can cover the amount of debt racked up.

" Household debt may not be as big a systemic financial risk as it was in the West, but it highlights a potential growth problem in Asia: without it, how resilient would consumption spending really be?" said HSBC economist Frederic Neumann in the report.

Other analysts have earlier flagged concerns over Asian debt. In February last year, S& P' s analyst, Tan Kim Eng, noted in a report that loose monetary conditions may be " magnifying financial and economic risks" .

" The conditions that supported robust economic growth in the region could turn less supportive in the future. In the current circumstances, a lack of regulatory vigilance could create possible financial instability," Mr Tan said.

But he also argued that debt-to-GDP ratios can overstate financial risk in some economies, particularly for financial centres such as Singapore and Hong Kong.

For example, companies may take loans from domestic banks to invest abroad, and these projects may not count towards the home economy' s GDP.

OCBC, which has the second-largest construction loan book in Singapore, said earlier this year that more property developers are taking loans from the bank for projects in London and Australia.

In a comparison of Singapore and Hong Kong, Barclays analyst Sharnie Wong said in a March report that Singapore banks have shown greater discipline in pricing loans.

In Singapore, personal loans - excluding those for housing - are typically secured against collateral, and the size of unsecured lending is restricted based on the individual' s income.

A person who earns more than $30,000 a year can be offered an unsecured loan of about four times his monthly salary. The bank may raise this ratio for a person who earns at least $120,000 a year.

And, Singapore is now reviewing rules for money-lending - usually for unsecured loans - and will look at, among other things, the cap on the total of such loans taken by each borrower.

By contrast, personal loans in Hong Kong are mostly unsecured, since lending rates can be as low as 2 per cent, and loan size can be up to 18 times of monthly income, Ms Wong said.

In Singapore, household debt-to-GDP ratio stood at about 75 per cent last year. This is higher than Hong Kong' s 62 per cent, though for Hong Kong, that is its historic high.

Over here, the debt ratio had breached the 90 per cent mark in 2002 and 2003, and household debt has since eased after the government introduced a borrowing cap for property loans, known as the total debt servicing ratio, Ms Wong said.

Housing loans in Singapore make up about three-quarters of all consumer loans, which stood at $228 billion in April.

S& P' s Mr Tan noted high domestic saving rates for some parts of Asia offer a buffer against rising debt. He also highlighted that Asia' s total leverage - which includes debt from the public and private sectors - remains " well lower" than in much of Europe, given the relatively lower government borrowings.

There are now brewing concerns over China' s government debt, though this is mainly focused on local government debt, Mark Austen, CEO of Asia Securities Industry and Financial Markets Association, a finance-trade body, told BT in an interview.

China' s overall local-government debt stood at 17.9 trillion yuan (S$3.6 trillion) - or about a third of its GDP - for the first six months through to June last year, said media reports that cited China' s National Audit Office figures.

In January, a Forbes article highlighted Singapore' s " significant public debt" .

But government borrowings here are not used to fund spending in a country that rarely runs a budget deficit. The sovereign bonds are issued mainly to create a government yield curve, used then to price other securities, such as private debt.

 

THREE weeks ago, this column discussed the strong likelihood that momentum and interest in local stocks would have to come from corporate news rather than from liquidity inflows from foreign investors (" Corporate news to underpin search for yield" , June 2).

Little has occurred since then to change this view - daily volume last week was consistently below the $1 billion mark, the fraction of business done in Straits Times Index (STI) components has dropped from around 60 per cent for most of this year to about 40 per cent now and the STI hasn' t shown much upside conviction, dropping about 35 points last week. The banks haven' t done much since a stellar run prior to their results announcements whilst the normally reliable Jardine Group hasn' t been in much focus in recent weeks.

Clearly, notwithstanding talk that it might be time to rediscover the joys that emerging markets offer, not many funds are putting hard cash on the line.

Fortunately for brokers, the local corporate sector has not sat still. There have been plenty of new deals, contracts, mergers, takeovers, placements, rights issues and so on to keep punters happy, prices buoyant and dealers' fingers hovering over their trading buttons.

 

[SINGAPORE] Singapore' s inflation and growth outlook will take a hit if the crisis in Iraq - which has shown no signs of abating - escalates further.

So say economists, who are keeping a close watch on the unfolding events in Iraq, where a Sunni Islamist extremist group has taken wide swathes of territory in the northern and central regions.

If the violence spills over into the country' s key oil-producing Southern area, analysts warn that a sharp jump in oil prices would mean a feed-through effect on imported inflation here, and a further knock-on effect on economic growth.

" It' s not the base case, but if there' s a major military intervention in the Middle East affecting the South of Iraq and involving Iran as well, things will get really bad," said Maybank head of FX research Saktiandi Supaat.